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On Friday, the GBP/USD pair experienced a significant drop, formally triggered by weak reports on business activity and retail sales in the UK. All three reports came in significantly below expectations, making the decline of the British pound entirely logical. However, even without these reports, we have long emphasized that the pound should continue to fall. This stance remains unchanged.
The pound remains overbought and unjustifiably expensive, the Federal Reserve's monetary policy easing factor has already been priced in, and the broader downward trend persists. This does not mean the pound will fall daily for several months. There will likely be corrections and pullbacks. However, the overall expectation is for further declines in the British currency, regardless of macroeconomic or fundamental developments.
In the 5-minute time frame, the pair fell by 90 pips in just a few hours on Friday. For comparison, the euro fell by 150 pips. Once again, the pound demonstrated greater resilience against the dollar but did not prevent it from declining. Traders could have entered the market with short positions after the pair broke below the 1.2547 level, which would have been profitable. The price later bounced several times from the 1.2502-1.2508 area, but entering long positions at this time is unlikely to be a good idea.
In the hourly time frame, GBP/USD continues to trend downward. We fully support the notion of further declines in the medium term, as it remains the only logical outcome. The pound has shown no willingness to correct despite having reasons to do so last week. The decline may continue since no particular catalyst is required for the market to sell the pair.
On Monday, if new sell signals are generated, novice traders can look for opportunities to capitalize on the ongoing downward movement.
On the 5-minute TF, you can now trade at levels 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2754, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993. No significant events are scheduled for Monday in the UK or the US, so strong movements are unlikely. However, the market has demonstrated a readiness to sell the pound under any circumstances, so traders should remain vigilant for further sell signals.
Support and Resistance Levels: Target levels for opening or closing positions. Take Profit orders can also be set here.
Red Lines: Channels or trendlines that show the current trend and the preferred trading direction.
MACD Indicator (14,22,3): A histogram and signal line that serve as supplementary trading signals.
Important Events and Reports: Found in the economic calendar, these can strongly influence price movements. During their release, trade cautiously or exit the market to avoid sharp reversals against the preceding trend.
Forex beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are critical for long-term success in trading.
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